Market Monitor - Automotive industry - Brazil

市場監測

  • 巴西
  • 自動化/交通

2014年10月01日

The slowdown in the economy has affected Brazil’s automotive sector and payment delays and defaults are expected to worsen in the coming months.

Brazil

  • Both production and sales are deteriorating
  • Rising payment delays and insolvencies
  • Pressure on suppliers and spare parts producers.

Automotive Brazil overview

The automotive sector has been severely hit by the slowdown in the Brazilian economy, which is expected to grow only 0.7% in 2014. Brazil is on the brink of recession because of a contraction in industrial production and slower than anticipated job growth. Lower growth, higher inflation and the ending of the Brazilian economic model based on subsidized consumption are having an impact on the whole automotive sector value chain: from the spare parts producers to car manufacturers and sellers. Scarce credit and reduced consumer spending power have hurt overall sales in a market that until recently was expected to be one of the world´s fastest growing car markets.

As well as the economic slowdown, a recent change in security features has increased the price of cars, adding one more stumbling block for sales and also affecting the aftermarket segment. The appreciation of the real has made the import of cars and car parts even more expensive: importing cars into Brazil has always been more expensive due to the high tax rates used to encourage foreign companies to establish local production plants.

A further complication is the low rate of vehicle repossession – 20% - in cases of default. Banks take two years, on average, to conclude the repossession process: one reason why banks are restrictive in granting loans for car purchase. Since this is an important factor in buying a car, a drop in car loans of more than 10% creates a further slowdown in sales.


Domestic car production is also affected by the deteriorating economic situation in neighbouring Argentina: the main market for Brazilian car exports. The trade flow between these two countries is affected by the restrictions on the freeing of dollars in Argentina to pay for its imports. Against this backdrop, it is unsurprising that margins have been squeezed in an attempt to boost sales volumes. The car industry’s high fixed costs mean that maintaining volumes is essential and this has put pressure on suppliers and spare parts producers that have heavy financial structures and growing debts to service.

Brazil automotive sector performance

Average payment times in this sector differ widely along the value chain: from 60 to 120 days. Car manufacturers normally have very long payment terms with their suppliers - even exceeding 120 days - while steel/metal producers usually ask for shorter payment terms for sales to suppliers/spare parts producers, adding to the pressure on them in terms of cash flow and high interest rates.

Given the current problems along the whole automotive value chain, we expect both payment delays and defaults to continue to worsen markedly in the coming months. As a result our current underwriting stance is cautious.

 

Brazilian automotive sector strengths weaknesses

相關資料

免責聲明

Each publication available on or from our websites, such as, but not limited to webpages, reports, articles, publications, tips and helpful content, trading briefs, infographics, videos (each a “Publication”) is provided for information purposes only and is not intended as a recommendation or advice as to particular transactions, investments or strategies in any way to any reader. Readers must make their own independent decisions, commercial or otherwise, regarding the information provided. While we have made every attempt to ensure that the information contained in any Publication has been obtained from reliable sources, Atradius is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in any Publication is provided ’as is’, with no guarantee of completeness, accuracy, timeliness or of the results obtained from its use, and without warranty of any kind, express or implied. In no event will Atradius, its related partnerships or corporations, or the partners, agents or employees thereof, be liable to you or anyone else for any decision made or action taken in reliance on the information in any Publication, or for any loss of opportunity, loss of profit, loss of production, loss of business or indirect losses, special or similar damages of any kind, even if advised of the possibility of such losses or damages.